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Item 8. Financial Statements and Supplementary Data

2024-07-15 compared with 2023-06-28 · 537 added, 574 removed, 223 unchanged (83% of the section changed)

Financial Statements and Supplementary

The following financial statements

are included in this Report:

Report of Independent Registered Public Accounting Firm

Financial Statements and Supplementary Data

following financial statements are included in this Report:

of Independent Registered Public Accounting Firm for the fiscal year ended March 31, 2024

Balance Sheets as of March 31, 2024 and 2023

Statements of Operations

for the fiscal years ended March 31, 2023 and 2022

Statements of Shareholders' Equity

for the fiscal years ended March 31, 2023 and

Statements of Cash Flows

for the fiscal years ended March 31, 2023 and

Statements of Operations for the fiscal years ended March 31, 2024 and 2023

Statements of Shareholders' Equity for the fiscal years ended March 31, 2024 and 2023

Statements of Cash Flows for the fiscal years ended March 31, 2024 and 2023

Notes to Financial Statements

Report of Independent Registered Public Accounting

Board of Directors and Shareholders

of Independent Registered Public Accounting Firm

the Board of Directors and Shareholders

Encision, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance

sheet of Encision Inc.

(the “Company”) as of March 31, 2023, and the related consolidated statement of operations, statements

of stockholders’ deficit, and cash flows for each of the year then ended, and the related notes and schedules (collectively referred

to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the

financial position of the Company as of March 31, 2023, and the results of its operations and its cash flows for each of the year then

ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility

of the entity’s management.

Our responsibility is to express an opinion on these financial statements based on our audit.

a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required

to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations

of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards

of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements

are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal

control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal

control over financial reporting.

on the Financial Statements

have audited the accompanying balance sheet of Encision, Inc.

(the Company) as of March 31, 2024, and the related statements of operations,

shareholders’ equity, and cash flows for the year then ended and the related notes (collectively referred to as the financial statements).

our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31,

2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally

accepted in the United States of America.

financial statements of the Company as of March 31, 2023, were audited by other auditors whose report dated June 28, 2023, expressed

an unqualified opinion on those statements.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits,

we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter Description

The Company’s inventories consist of finished

goods and raw materials, which are manufactured or purchased for use in the Company’s finished goods.

The Company offers several

different products to its customers.

The cost of the inventory is a combination of raw materials, labor to convert those materials to

components of the inventory and finished goods, and an allocation of overhead and related costs.

The Company also prepares an obsolescence

valuation at year end to properly record inventory at lower of cost or net realizable value.

Significant judgment is exercised by the Company in

determining the costs of inventory and includes the following:

· Determination of which costs to include at each manufacturing phase, including

overhead allocation and materials used for production and finished goods.

· Identification of Inventory on hand and any obsolescence reserve or write-offs

determined based on usability of inventory on hand.

Given the inherent uncertainty in forecasting product

demand, including the impact of product releases, auditing the reasonableness of management’s estimated and assumptions related

to inventory reserve required a high degree of auditor judgement and an increased extent of effort.

How the Critical Audit Matter Was Addressed

Our principal audit procedures related to the Company's

inventory included the following:

· We evaluated management’s significant accounting policies related

to inventory for reasonableness.

· We selected a sample of finished goods and raw materials and performed detailed

testing over the items selected, including but not limited to the following:

o Agreed the bill of materials source documents for each selection, including

invoice, labor and overhead allocations, and any other items relevant to price verification

o Tested managements identification and application of inventory costs for

components and finished goods

o Performed a physical inventory count as of year-end and tested the reconciliation

of quantities on hand to the inventory listing, performing both existence and completeness testing.

o Assessed the reasonableness of costs and the appropriate application of

managements significant accounting policies related to Inventory, including determination of inventory obsolescence reserve.

Emphasis of Matters-Risks and Uncertainties

The Company is not able to predict the ultimate impact that COVID -19 will

have on its business.

However, if the current economic conditions continue, the pandemic could have an adverse impact on the economies

and financial markets of many countries, including the geographical area in which the Company plans to operate.

/s/ Gries & Associates, LLC

We have served as the Company’s auditor since 2021.

June 28, 2023

Encision Inc.

Balance Sheets

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated

or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation - Finished Goods

Company’s inventories consist of finished goods and raw materials, which are manufactured or purchased for use in the Company’s

finished goods.

The Company offers several different products to its customers.

The cost of the internally produced inventory is a combination

of raw materials, labor to convert those materials to components of the inventory to finished goods, and an allocation of overhead and

related costs.

Significant judgment is exercised by the Company in determining the components of the costs of inventory and includes

the determination of which costs to include at each manufacturing phase, including overhead allocation and materials used for production

of finished goods, and monitoring the appropriate absorption of the overhead cost and correcting the hourly rate when necessary

the Critical Audit Matter Was Addressed in the Audit

principal audit procedures related to the Company's inventory included the following:

assessed the reasonableness of costs and the appropriate application of management’s

significant accounting policies related to inventory, including determination of inventory

obsolescence reserve.

selected a sample of finished goods and raw materials and performed detailed testing over

the items selected, including but not limited to the following:

the bill of materials source documents for each selection, including raw materials value,

labor, and overhead allocations, and any other items relevant to price verification.

a selection of raw materials to the source documents, invoices, and any other items relevant

to price verification

managements identification and application of the overhead calculation and labor cost

have served as the Company’s auditor since 2024.

Angeles, California

ID Number 6580

March 31, 2024

2 unchanged sentences

Accounts receivable

Inventories, net of reserve for obsolescence of $ 51,000 at March 31, 2023 and $ 36,000 at March 31, 2022

Prepaid expenses and other assets

Total current assets

Furniture, fixtures and equipment, at cost

Furniture, fixtures and equipment

Accumulated depreciation

2 unchanged sentences

Equipment, net

Right of use asset

Patents, net of accumulated amortization of $ 306,946 at March 31, 2023 and $ 282,081 at March 31, 2022

Right of use asset, net

LIABILITIES AND SHAREHOLDERS’ EQUITY

24 unchanged sentences

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

The accompanying notes to financial statements are an integral part of

these statements.

Encision Inc.

Statements of Operations

accompanying notes to financial statements are an integral part of these statements.

of Operations

March 31, 2024

9 unchanged sentences

OPERATING (LOSS)

OTHER INCOME (EXPENSE):

OTHER (EXPENSE):

Interest expense, net

Extinguishment of debt income

Other income, (expense) net

Interest expense, extinguishment of debt income and other income, expense, net

Interest expense and other income, expense, net

(LOSS) BEFORE PROVISION FOR INCOME TAXES

1 unchanged sentence

$ ( 691,783 )

$ ( 323,945 )

Net (loss) per share—basic and diluted

Weighted average shares—basic

Weighted average shares—diluted

The accompanying notes to financial statements are an integral part of

these statements.

Encision Inc.

Statements of Shareholders’ Equity

Shareholders’

Weighted average shares—basic and diluted

accompanying notes to financial statements are an integral part of these statements.

of Shareholders’ Equity

Shares of Common Stock

Common Stock and Additional

Paid-in Capital

Total Shareholders’

BALANCES AT MARCH 31, 2022

$ ( 21,529,319 )

Compensation expense related to equities

Compensation expense related to stock based compensation

Options exercised

1 unchanged sentence

$ ( 21,853,264 )

Compensation expense related to equities

Compensation expense related to stock based compensation

Options exercised

1 unchanged sentence

$ ( 22,545,047 )

The accompanying notes to financial statements are an integral part of

these statements.

Encision Inc.

Statements of Cash Flows

accompanying notes to financial statements are an integral part of these statements.

of Cash Flows

March 31, 2024

March 31, 2023

Cash flows (used in) operating activities:

Cash flows provided by (used in) operating activities:

$ ( 691,783 )

$ ( 323,945 )

Adjustments to reconcile net (loss) income to net cash (used in) operating activities:

Extinguishment of debt income

Write-off of tooling

Depreciation and amortization

Stock-based compensation expense related to stock options

(Recovery from) doubtful accounts, net change

Provision for (recovery from) for inventory obsolescence, net change

Other income from release of account payable

Provision for inventory obsolescence

Change in operating assets and liabilities:

4 unchanged sentences

Accrued compensation and other accrued liabilities

Net cash (used in) operating activities

Net cash provided by (used in) operating activities

Cash flows (used in) investing activities:

2 unchanged sentences

Cash flows provided by (used in) financing activities:

Borrowings from credit facility, net change

Borrowings from (paydown of) credit facility, net change

Borrowings from (paydown of) secured notes

7 unchanged sentences

Cash paid during the year for interest

The accompanying notes to financial statements are an integral part of

these statements.

ENCISION INC.

NOTES TO FINANCIAL STATEMENTS

Description of Business

and Basis of Presentation

accompanying notes to financial statements are an integral part of these statements.

ENCISION INC.

is a medical device company that designs,

develops, manufactures and markets patented surgical instruments that provide greater safety to patients undergoing minimally-invasive

We believe that our patented AEM ® surgical instrument technology is changing the marketplace for electrosurgical

devices and instruments by providing a solution to a well-documented risk in laparoscopic surgery.

Our sales to date have been made primarily

in the United States.

We have an accumulated deficit of $ 21,853,264 at March

Operating funds have been provided primarily by issuances of our common stock and warrants, the exercise of stock options to

purchase our common stock, loans, and by operating profits.

Our liquidity has diminished because of prior years’ operating losses,

and we may be required to seek additional capital in the future.

Our strategic marketing and sales plan is designed

to expand the use of our products in surgically active hospitals in the United States.

In February 2023, we signed a Proof of Concept Services

Agreement with Vicarious Surgical Inc.

TO FINANCIAL STATEMENTS

of Business and Basis of Presentation

is a medical device company that designs, develops, manufactures and markets patented surgical instruments that provide greater

safety to patients undergoing minimally-invasive surgery.

We believe that our patented AEM ® surgical instrument technology

is changing the marketplace for electrosurgical devices and instruments by providing a solution to a well-documented risk in laparoscopic

Our sales to date have been made primarily in the United States.

Sales included $ 311,104 from Australia and $ 48,861 from New

have an accumulated deficit of $ 22,545,047 at March 31, 2024.

Operating funds have been provided primarily by issuances of our common

stock and warrants, the exercise of stock options to purchase our common stock, loans, and by operating profits.

Our liquidity has diminished

because of prior years’ operating losses, and we may be required to seek additional capital in the future.

strategic marketing and sales plan is designed to expand the use of our products in surgically active hospitals in the United States.

February 2024, we signed a Proof-of-Concept Services Agreement with Vicarious Surgical Inc.

(“Vicarious”).

The Vicarious robot design intends to maximize visualization, precision,

and control of instruments in robotic-assisted minimally invasive surgery.

In February 2023, we signed a Supplier Agreement (“Agreement”)

with Human Xtensions (“Human X”).

Under the Agreement, we will perform manufacturing services, which includes procuring materials,

manufacturing, assembling, and testing products pursuant to detailed written specifications for Human X.

Human X develops unmediated surgical

systems that combine the capacity of robotics with the benefits of handheld tools and ergonomic bed mounts.

We had (net loss) available to shareholders of $( 323,945 )

and $( 65,594 ) for the fiscal years ended March 31, 2023 and 2022, respectively.

At March 31, 2023, we had $ 188,966 in cash available to

fund future operations, and outstanding borrowings of $ 227,300 .

In February 2021, we entered into an unsecured promissory note under the

PPP for a principal amount of $ 533,118 .

The PPP was established under the congressionally approved CARES Act.

The term of the PPP loan

is for two years with an interest rate of 1.0 % per year, which will be deferred for the first six months of the term of the loan.

the initial six-month deferral period, the loan requires monthly payments of principal and interest until maturity with respect to any

portion of the PPP loan which is not forgiven.

Under the terms of the CARES Act, a PPP loan recipient may apply for, and be granted,

forgiveness for all or a portion of loans granted under the PPP.

During the quarter ended September 30, 2021 we achieved the requirements

for forgiveness of the loan and recognized extinguishment of debt income.

We increased our pricing on products to mitigate somewhat our

higher material costs.

We have a new line of credit for up to $ 1 million, restricted by eligible receivables.

The Vicarious

robot design intends to maximize visualization, precision, and control of instruments in robotic-assisted minimally invasive surgery.

had (net loss) available to shareholders of $( 691,783 ) and $( 323,945 ) for the fiscal years ended March 31, 2024 and 2023, respectively.

At March 31, 2024, we had $ 42,509 in cash available to fund future operations.

We increased our pricing on products to mitigate somewhat

our higher material costs.

We have a line of credit for up to $ 1 million, restricted by eligible receivables.

Management concludes that

1 unchanged sentence

issuance of the financial statements

The accompanying consolidated financial statements

have been prepared assuming that we will continue as a going concern.

Summary of Significant Accounting

Use of Estimates in the Preparation of Financial

The preparation of financial statements in conformity with accounting principles generally accepted in the United States

(“GAAP”) requires management to make estimates and assumptions.

Such estimates and assumptions affect the reported amounts

of assets and liabilities as well as disclosure of contingent assets and liabilities at the date of the financial statements and the reported

amounts of sales and expense during the reporting period.

Actual results could differ from those estimates.

Cash and Cash Equivalents For purposes of reporting

cash flows, we consider all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents.

Fair Value of Financial Instruments .

Our financial

instruments consist of cash, cash equivalents, short-term trade receivables, payables, line of credit, PPP loan, Economic Injury Disaster

Loan (“EIDL”) loan and secured notes.

The carrying values of cash, cash equivalents, trade receivables, payables, line of

credit approximate their fair value due to their short maturities.

The fair values of the EIDL Loan approximates the carrying value based

on estimated discounted future cash flows using the current rates at which similar loans would be made.

Concentration of Credit Risk .

Financial instruments,

which potentially subject us to concentrations of credit risk, consist of cash and cash equivalents, and accounts receivable.

value of all financial instruments approximates fair value.

The amount of cash on deposit with financial institutions occasionally exceeds

the $ 250,000 federally insured limit at March 31, 2023.

However, we believe that cash on deposit that exceeds $ 250,000 in the financial

institutions is financially sound and the risk of loss is minimal.

We have no significant off-balance sheet concentrations

of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements.

We maintain the majority of

our cash balances with one financial institution in the form of demand deposits.

Accounts receivable are typically unsecured and are

derived from transactions with and from entities in the healthcare industry primarily located in the United States.

Accordingly, we may

be exposed to credit risk generally associated with the healthcare industry.

We maintain allowances for doubtful accounts for estimated

losses resulting from the inability of our customers to make required payments.

We charge interest

on past due accounts on a case-by-case basis.

The net accounts receivable balance at March 31, 2023

of $ 947,623 included no more than 8% from any one customer.

The net accounts receivable balance at March 31, 2022 of $ 1,024,370 included

no more than 14% from any one customer.

Warranty Accrual .

provide for the estimated cost of product warranties at the time sales are recognized.

While we engage in extensive product quality programs

and processes, including actively monitoring and evaluating the quality of our component suppliers, our warranty obligation is based upon

historical experience and is also affected by product failure rates and material usage incurred in

correcting a product failure.

Should actual product failure rates or material usage costs differ from our estimates, revisions to the

estimated warranty liability would be required.

There was no warranty accrual at March 31, 2023.

accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern.

of Significant Accounting Policies

of Estimates in the Preparation of Financial Statements .

The preparation of financial statements in conformity with accounting principles

generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions.

Such estimates and

assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities at the date

of the financial statements and the reported amounts of sales and expense during the reporting period.

Actual results could differ from

those estimates.

and Cash Equivalents For purposes of reporting cash flows, we consider all cash and highly liquid investments with an original maturity

of three months or less to be cash equivalents.

Value of Financial Instruments .

Our financial instruments consist of cash, cash equivalents, short-term trade receivables, payables,

line of credit, PPP loan, Economic Injury Disaster Loan (“EIDL”) loan and secured notes.

The carrying values of cash, cash

equivalents, trade receivables, payables, line of credit approximate their fair value due to their short maturities.

The fair values

of the EIDL Loan approximates the carrying value based on estimated discounted future cash flows using the current rates at which similar

loans would be made.

Concentration

of Credit Risk .

Financial instruments, which potentially subject us to concentrations of credit risk, consist of cash and cash equivalents,

and accounts receivable.

The carrying value of all financial instruments approximates fair value.

The amount of cash on deposit with

financial institutions occasionally exceeds the $ 250,000 federally insured limit at March 31, 2024.

However, we believe that cash on

deposit that exceeds $ 250,000 in the financial institutions is financially sound and the risk of loss is minimal.

have no significant off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign

hedging arrangements.

We maintain the majority of our cash balances with one financial institution in the form of demand deposits.

receivable are typically unsecured and are derived from transactions with and from entities in the healthcare industry primarily located

in the United States.

Accordingly, we may be exposed to credit risk generally associated with the healthcare industry.

We maintain allowances

for doubtful accounts for estimated losses resulting from the inability of our customers to make

required payments.

We charge interest on past due accounts on a case-by-case basis.

accounts receivable balance at March 31, 2024 of $ 891,129 included no more than 11% from any one customer.

The accounts receivable balance

at March 31, 2023 of $ 920,721 included no more than 8% from any one customer.

We provide for the estimated cost of product warranties at the time sales are recognized.

While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our

component suppliers, our warranty obligation is based upon historical experience and is also affected by product failure rates and material

usage incurred in correcting a product failure.

Should actual product failure rates or material

usage costs differ from our estimates, revisions to the estimated warranty liability would be required.

There was no warranty accrual

at March 31, 2024.

Inventories .

are stated at the lower of cost (first-in, first-out basis) or net realizable value.

We reduce inventory for estimated obsolete or unmarketable

inventory equal to the difference between the cost of inventory and the net realizable value based upon assumptions about future demand

and market conditions.

If actual market conditions are less favorable than those projected by management, additional inventory write-downs

may be required.

At March 31, 2023 and 2022, inventory consisted of

the following:

Inventories are stated at the lower of cost

(first-in, first-out basis) or net realizable value.

We reduce inventory for estimated obsolete or unmarketable inventory equal to the

difference between the cost of inventory and the net realizable value based upon assumptions about future demand and market conditions.

If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

March 31, 2024 and 2023, inventory consisted of the following:

Schedule of inventory

March 31, 2023

March 31, 2022

Raw materials

Finished goods

Total gross inventories

Less reserve for obsolescence

Total net inventories

A summary of the activity in our inventory reserve

for obsolescence is as follows:

Summary of inventory reserve for obsolescence

March 31, 2023

March 31, 2022

Balance, beginning of year

Provision for estimated obsolescence

Write-off of obsolete inventory

Balance, end of year

Property and Equipment .

Property and equipment

are stated at cost, with depreciation computed over the estimated useful lives of the assets, generally three to seven years.

straight-line method of depreciation for property and equipment.

Leasehold improvements are depreciated over the shorter of the remaining

lease term or the estimated useful life of the asset.

Maintenance and repairs are expensed as incurred and major additions, replacements

and improvements are capitalized.

Depreciation expense for the years ended March 31, 2023 and 2022 was $ 59,290 and $ 62,970 , respectively.

Long-Lived Assets .

Long-lived assets are reviewed

for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

asset is considered impaired when estimated future cash flows related to the asset, undiscounted and without interest, are insufficient

to recover the carrying amount of the asset.

If deemed impaired, the long-lived asset is reduced to its estimated fair value.

assets to be disposed of are reported at the lower of their carrying amount or estimated fair value less cost to sell.

The costs of applying for patents

are capitalized and amortized on a straight-line basis over the lesser of the patent’s economic or legal life (20 years from the

date of application in the United States).

the fiscal year 2024, Encision added $ 153,511 in additional inventory reserve and wrote off $ 141,511 in inventory.

In fiscal year 2023,

Encision added $ 49,917 in inventory reserve and wrote off $ 34,917 in previously reserved inventory.

No inventory reserve was reduced

from the prior year.

Total Raw Materials reserve for fiscal year 2024 is $ 53,948 and $ 32,107 for fiscal year 2023.

Finished goods reserve

for fiscal year 2024 is $ 9,052 and $ 18,893 in fiscal year 2023.

of Use Assets and Lease Liabilities .

We determine if an arrangement includes a lease at the inception of the agreement and the right-of-use

asset and lease liability is determined at the lease commencement date and is based on the present value of estimated lease payments.

Our lease agreements contain both fixed and variable lease payments, none of which are based on a rate or an index.

Fixed lease payments

are included in the determination of the right-of-use asset and lease liability.

Variable lease payments that are not based on a rate

or index are expensed when incurred.

The present value of estimated lease payments is determined utilizing the rate implicit in the lease

agreement if that rate can be determined.

If the implicit rate cannot be determined, the present value of estimated lease payments is

determined utilizing our incremental borrowing rate.

The incremental borrowing rate is determined at the lease commencement date and

is estimated utilizing similar or collateralized borrowing instruments adjusted for the terms of leasing arrangement as necessary.

lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The lease agreement is for

our building.

The original lease is from June 3, 2004 and was amended in August 2023 to extend the term until October 31, 2026.

as of March 2024 and 2023, for the Right of Use Asset were $ 900,787 and $ 496,004 , respectively.

The balances as of March 2024 and 2023

for Lease Liabilities were $ 1,066,987 and $ 593,494 , respectively.

and Equipment .

Property and equipment are stated at cost, with depreciation computed over the estimated useful lives of the assets,

generally three to seven years.

We use the straight-line method of depreciation for property and equipment.

Leasehold improvements are

depreciated over the shorter of the remaining lease term or the estimated useful life of the asset.

Maintenance and repairs are expensed

as incurred and major additions, replacements and improvements are capitalized.

Depreciation expense for the years ended March 31, 2024

and 2023 was $ 61,322 and $ 59,290 , respectively.

Property and equipment additions for the years ended March 31, 2024 and 2023 were $ 12,050

and $ 173,269 , respectively.

Property and equipment is comprised principally of equipment and is depreciated over seven years.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount

of an asset may not be recoverable.

A long-lived asset is considered impaired when estimated future cash flows related to the asset,

undiscounted and without interest, are insufficient to recover the carrying amount of the asset.

If deemed impaired, the long-lived asset

is reduced to its estimated fair value.

Long-lived assets to be disposed of are reported at the lower of their carrying amount or estimated

fair value less cost to sell.

The costs of applying for patents are capitalized and amortized on a straight-line basis over the lesser of the patent’s economic

or legal life (20 years from the date of application in the United States).

Capitalized costs are expensed if patents are not issued.

We review the carrying value of our

patents periodically to determine whether the patents have continuing value and such reviews could result in the conclusion that the recorded

amounts have been impaired.

We review the carrying value of our patents periodically to determine whether the patents have continuing value and such reviews could

result in the conclusion that the recorded amounts have been impaired.

A summary of our patents at March 31, 2024 and 2023 is as follows:

Summary of patents

March 31, 2023

March 31, 2022

Patents issued

6 unchanged sentences

Total net patents and patent applications

The expected annual amortization expense related to

patents and patent applications as of March 31, 2023, for the next five fiscal years, is as follows:

expected annual amortization expense related to patents and patent applications as of March 31, 2024, for the next five fiscal years,

is as follows:

Schedule of expected annual amortization expense

Other Accrued Liabilities .

At March 31, 2023

and 2022, other accrued liabilities consisted of the following:

Accrued Liabilities .

At March 31, 2024 and 2023, other accrued liabilities consisted of the following:

Schedule of other accrued liabilities

March 31, 2023

March 31, 2022

Sales commissions

4 unchanged sentences

Total other accrued liabilities

Income Taxes .

We account for income taxes under

the provisions of ASC Topic 740, “Accounting for Income Taxes” (“ASC 740”).

ASC 740 requires recognition of deferred

income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences

between the financial reporting and tax bases of assets and liabilities.

ASC 740 also requires recognition of deferred tax assets for

the expected future tax effects of all deductible temporary differences, loss carryforwards and tax credit carryforwards.

assets are then reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefits which, more likely than not

based on current circumstances, are not expected to be realized.

Should we achieve sufficient, sustained income in the future, we may

conclude that some or all of the valuation allowance should be reversed (Note 5).

ASC 740 prescribes a comprehensive model for how companies

should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on

a tax return.

Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the

position will be sustained upon examination by the tax authorities.

Such tax positions must initially and subsequently be measured as

the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority

assuming full knowledge of the position and relevant facts.

The cumulative effect of adopting ASC 740 on April

1, 2007 has been recorded net in deferred tax assets, which resulted in no ASC 740 liability on the balance sheet.

The total amount of

unrecognized tax benefits as of the date of adoption was zero.

There are open statutes of limitations for taxing authorities in federal

and state jurisdictions to audit the Company’s tax returns from fiscal year ended March 31, 2003 through the current period.

policy is to account for income tax related interest and penalties in income tax expense in the statements of operations.

There have been

no income tax related interest or penalties assessed or recorded.

Because the Company has provided a full valuation allowance on all of

its deferred tax assets, the adoption of ASC 740 had no impact on our effective tax rate.

Revenue Recognition .

We record revenue at a

single point in time, when control is transferred to the customer, which is consistent with past practice.

We will continue to apply our

current business processes, policies, systems and controls to support recognition and disclosure.

Our shipping policy is FOB Shipping

We recognize revenue from sales to stocking distributors when there is no right of return, other than for normal warranty claims.

We account for income taxes under the provisions of ASC Topic 740, “Accounting for Income Taxes” (“ASC 740”).

ASC 740 requires recognition of deferred income tax assets and liabilities for the expected future income tax consequences, based on

enacted tax laws, of temporary differences between the financial reporting and tax bases of assets and liabilities.

ASC 740 also requires

recognition of deferred tax assets for the expected future tax effects of all deductible temporary differences, loss carryforwards and

tax credit carryforwards.

Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for the amount of any tax

benefits which, more likely than not based on current circumstances, are not expected to be realized.

Should we achieve sufficient, sustained

income in the future, we may conclude that some or all of the valuation allowance should be reversed (Note 5).

740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements

uncertain tax positions taken or expected to be taken on a tax return.

Under ASC 740, tax positions must initially be recognized in the

financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities.

positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of

being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

are open statutes of limitations for taxing authorities in federal and state jurisdictions to audit the Company’s tax returns from

fiscal year ended March 31, 2003 through the current period.

Our policy is to account for income tax related interest and penalties in

income tax expense in the statements of operations.

There have been no income tax related interest or penalties assessed or recorded.

The Company has provided a full valuation allowance on all of its deferred tax assets.

Recognition .

We record revenue at a single point in time, when control is transferred to the customer, which is consistent with past

We will continue to apply our current business processes, policies, systems and controls to support recognition and disclosure.

Our shipping policy is FOB Shipping Point.

We recognize revenue from sales to stocking distributors when there is no right of return,

other than for normal warranty claims.

We have no ongoing obligations related to product sales, except for normal warranty obligations.

As presented on the Statement of Operations

our revenue is disaggregated between product revenue and service revenue.

As it relates specifically to product revenue, we do not believe

further disaggregation is necessary as substantially all of our product revenue comes from multiple products within a line of medical

Our engineering service contracts are billed on a time and materials basis and revenue is recognized over time as the services

are performed.

Sales Taxes .

We collect sales tax from customers

and remit the entire amount to each respective state.

We recognize revenue from product sales net of sale taxes.

Research and Development Expenses .

research and development costs for products and processes as incurred.

Advertising Costs .

We expense advertising costs

As presented on the Statement of Operations our revenue is disaggregated between product revenue and service revenue.

As it relates specifically

to product revenue, we do not believe further disaggregation is necessary as substantially all our product revenue comes from multiple

products within a line of medical devices.

Our engineering service contracts are billed on a time and materials basis and revenue is

recognized over time as the services are performed.

determine revenue recognition through the following steps:

(1) identification of the contract with a customer;

(2) identification of

the performance obligations in the contract;

(3) determination of the transaction price;

(4) allocation of the transaction price to the

performance obligations in the contract (where revenue is allocated on a relative standalone selling price basis by maximizing the use

of observable inputs to determine the standalone selling price for each performance obligation);

and (5) recognition of revenue when,

or as, we satisfy a performance obligation.

606 requires the disaggregation of revenue into broad categories, which we have defined as shown below.

Schedule of disaggregation revenue

March 31, 2024

March 31, 2023

Product revenue

Service revenue

Total revenues

We collect sales tax from customers and remit the entire amount to each respective state.

We recognize revenue from product

sales net of sale taxes.

and Development Expenses .

We expense research and development costs for products and processes as incurred.

We expense advertising costs as incurred.

Advertising expense for the years ended March 31, 2024 and 2023 was minimal.

Stock-Based Compensation .

Stock-based compensation

is presented in accordance with the guidance of ASC Topic 718, “Compensation – Stock Compensation” (“ASC 718”).

Under the provisions of ASC 718, companies are required to estimate the fair value of share-based payment awards on the date of grant

using an option-pricing model.

The value of the portion of the award that is ultimately expected to vest is recognized as expense over

the requisite service periods in our statements of operations.

ASC 718 requires companies to estimate the fair value

Compensation .

Stock-based compensation is presented in accordance with the guidance of ASC Topic 718, “Compensation –

Stock Compensation” (“ASC 718”).

Under the provisions of ASC 718, companies are required to estimate the fair value

of share-based payment awards on the date of grant using an option-pricing model.

The value of the portion of the award that is ultimately

expected to vest is recognized as expense over the requisite service periods in the accompanying statements of operations.

Stock-based compensation expense recognized during

the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period.

compensation expense recognized in our statements of operations for fiscal years 2023 and 2022 included compensation expense for share-based

payment awards granted prior to, but not yet vested as of March 31, 2023, based on the grant date fair value.

Compensation expense for

all share-based payment is recognized using the straight-line, single-option method.

As stock-based compensation expense recognized in

the accompanying statements of operations for fiscal years 2023 and 2022 is based on awards ultimately expected to vest, it has been reduced

for estimated forfeitures.

ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent

periods if actual forfeitures differ from those estimates.

We used the Black-Scholes option-pricing model (“Black-Scholes

model”) to determine fair value.

Our determination of fair value of share-based payment awards on the date of grant using an option-pricing

model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables.

These variables

include, but are not limited to our expected stock price volatility over the term of the awards, and actual and projected employee stock

option exercise behaviors.

Although the fair value of employee stock options is determined in accordance with ASC 718 using an option-pricing

model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

Stock-based compensation expense recognized under

ASC 718 for fiscal years 2023 and 2022 was $ 51,892 and $ 40,853 , respectively, which consisted of stock-based compensation expense related

to director and employee stock options.

Stock-based compensation expense related to director

and employee stock options under ASC 718 for fiscal years 2022 and 2021 was allocated as follows:

expected to vest is recognized as expense over the requisite service periods in our statements of operations.

718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model.

value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in

the accompanying statements of operations.

compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately

expected to vest during the period.

Stock-based compensation expense recognized in our statements of operations for fiscal years 2024

and 2023 included compensation expense for share-based payment awards granted prior to, but not yet vested as of March 31, 2024, based

on the grant date fair value.

Compensation expense for all share-based payment is recognized using the straight-line, single-option method.

As stock-based compensation expense recognized in the accompanying statements of operations for fiscal years 2024 and 2023 is based on

awards ultimately expected to vest, it has been reduced for estimated forfeitures.

ASC 718 requires forfeitures to be estimated at the

time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

used the Black-Scholes option-pricing model (“Black-Scholes model”) to determine fair value.

Our determination of fair value

of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions

regarding a number of highly complex and subjective variables.

These variables include, but are not limited to our expected stock price

volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.

Although the fair value of

employee stock options is determined in accordance with ASC 718 using an option-pricing model, that value may not be indicative of the

fair value observed in a willing buyer/willing seller market transaction.

compensation expense recognized under ASC 718 for fiscal years 2024 and 2023 was $ 53,552 and $ 51,892 , respectively, which consisted of

stock-based compensation expense related to director and employee stock options.

compensation expense related to director and employee stock options under ASC 718 for fiscal years 2024 and 2023 was allocated as follows:

Schedule of stock-based compensation expense

March 31, 2023

March 31, 2022

Cost of sales

3 unchanged sentences

Stock-based compensation expense

Segment Reporting .

We have concluded that we

have two operating segments, product and service.

Product designs, develops, manufactures and markets patented surgical instruments.

performs electrical engineering activities for external entities.

We have concluded that we have two operating segments, product and service.

Product designs, develops, manufactures and

markets patented surgical instruments.

Service performs electrical engineering activities for external entities.

Schedule of operating segments

Year Ended March 31, 2023

Year Ended March 31, 2022

Ended March 31, 2024

Ended March 31, 2023

Cost of revenue

3 unchanged sentences

Equipment and patents, net

Basic and Diluted Income per Common Share .

Net income per share is calculated in accordance with ASC Topic 260, "Earnings Per Share" ("ASC 260").

Under the provisions

of ASC 260, basic net income per common share is computed by dividing net income for the period by the weighted average number of common

shares outstanding for the period.

Diluted net income per common share is computed by dividing the net income for the period by the weighted

average number of common and potential common shares outstanding during the period if the effect of the potential common shares is dilutive.

Because we had a loss in fiscal years 2023 and 2022, the shares used in the calculation of dilutive potential common shares exclude options

to purchase shares.

The following table presents the calculation of basic and diluted net income

(loss) per share:

and Diluted Income per Common Share .

Net income per share is calculated in accordance with ASC Topic 260, "Earnings Per Share"

Under the provisions of ASC 260, basic net income per common share is computed by dividing net income for the

period by the weighted average number of common shares outstanding for the period.

Diluted net income per common share is computed by

dividing the net income for the period by the weighted average number of common and potential common shares outstanding during the period

if the effect of the potential common shares is dilutive.

Because we had a loss in fiscal years 2024 and 2023, the shares used in the

calculation of dilutive potential common shares exclude options to purchase shares.

following table presents the calculation of basic and diluted net income (loss) per share:

Schedule of basic and diluted net income (loss) per share

March 31, 2023

March 31, 2022

Net income (loss)

$ ( 691,783 )

$ ( 323,945 )

Weighted-average shares — basic

3 unchanged sentences

Antidilutive equity units

Recent Accounting Pronouncements .

In June 2016,

the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments”.

ASU 2016-13 adds a current expected

credit loss (“CECL”) impairment model to U.S.

GAAP that is based on expected losses rather than incurred losses.

retrospective adoption is required with any cumulative-effect adjustment recorded to retained earnings as of the beginning of the period

ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, excluding smaller reporting entities, which

will be effective for fiscal years beginning after December 15, 2023.

We will adopt ASU 2016-13 beginning April 1, 2023 and do not expect

the application of the CECL impairment model to have a significant impact on our allowance for uncollectible amounts for accounts receivable.

Shareholders’ Equity

Stock Option Plans.

We adopted our 2014 Equity

Incentive Plan (the “Plan,” as summarized below) to promote our and our shareholders’ interests by helping us to attract,

retain and motivate our key employees and associates.

Under the terms of the Plan, the Board of Directors may grant incentive and non-qualified

stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, and other stock-based awards.

purchase price of the shares subject to a stock option will be the fair market value of our common stock on the date the stock option

Generally, vesting of stock options occurs such that 20% becomes exercisable on each anniversary of the date of grant for

each of the five years following the grant date of such option.

Generally, all stock options must be exercised within five years from

the date granted.

The number of common shares reserved for issuance under the Plan is 1,100,000 shares of common stock, subject to adjustment

for dividend, stock split or other relevant changes in our capitalization.

Under ASC 718, the value of each employee stock option

was estimated on the date of grant using the Black-Scholes model for the purpose of financial information in accordance with ASC 718.

The use of a Black-Scholes model requires the use of actual employee exercise behavior data and the use of a number of assumptions including

expected volatility, risk-free interest rate and expected dividends.

Employee stock options for 155,000 and 270,000 shares of stock were

granted during fiscal years 2023 and 2022, respectively.

As of March 31, 2023, $ 194,000 of total unrecognized

compensation costs related to nonvested stock is expected to be recognized over a period of five years.

The assumptions for employee stock

options are summarized as follows:

Option Plans.

We adopted our 2014 Equity Incentive Plan (the “Plan,” as summarized below) to promote our and our shareholders’

interests by helping us to attract, retain and motivate our key employees and associates.

Under the terms of the Plan, the Board of Directors

may grant incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance

units, and other stock-based awards.

The purchase price of the shares subject to a stock option will be the fair market value of our

common stock on the date the stock option is granted.

Generally, vesting of stock options occurs such that 20% becomes exercisable on

each anniversary of the date of grant for each of the five years following the grant date of such option.

Generally, all stock options

must be exercised within five years from the date granted.

The number of common shares reserved for issuance under the Plan is 1,100,000

shares of common stock, subject to adjustment for dividend, stock split or other relevant changes in our capitalization.

ASC 718, the value of each employee stock option was estimated on the date of grant using the Black-Scholes model for the purpose of

financial information in accordance with ASC 718.

The use of a Black-Scholes model requires the use of actual employee exercise behavior

data and the use of a number of assumptions including expected volatility, risk-free interest rate and expected dividends.

Employee stock

options for 120,000 and 155,000 shares of stock were granted during fiscal years 2024 and 2023, respectively.

of March 31, 2024, $ 145,000 of total unrecognized compensation costs related to nonvested stock is expected to be recognized over a period

of five years.

During the year ended March 31, 2024, various fully vested five-year stock options to purchase 328,916 shares of common

stock of us previously granted to board members and employees expired unexercised.

assumptions for employee stock options are summarized as follows:

Summary of assumptions for employee stock options

March 31, 2024

March 31, 2022

Dividend yield

Expected volatility

Risk-free interest rate

4.05 % to 4.64 %

0.8 % to 1.05 %

Expected life (in years)

Expected volatility

Expected dividend

Cumulative compensation cost recognized in net income

or loss with respect to options that are forfeited prior to vesting is adjusted as a reduction of compensation expense in the period of

The volatility of the stock is based on the historical volatility for the period that approximates the expected lives of the

options being valued.

$ 0.39 to $ 0.75

Exercise price

$ 0.33 to $ 0.38

compensation cost recognized in net income or loss with respect to options that are forfeited prior to vesting is adjusted as a reduction

of compensation expense in the period of forfeiture.

The volatility of the stock is based on the historical volatility for the period

that approximates the expected lives of the options being valued.

Fair value computations are highly sensitive to the volatility factor;

the greater the volatility, the higher the

computed fair value of options granted.

The total fair value of options granted was computed

to be approximately $ 56,600 and $ 213,000 , for the fiscal years ended March 31, 2023 and 2022, respectively.

For disclosure purposes, these

amounts are amortized ratably over the vesting periods of the options.

Effects of stock-based compensation, net of the effect of forfeitures,

totaled $ 51,892 and $ 40,853 for fiscal years 2023 and 2022, respectively.

The Black-Scholes model was developed for use in estimating

the fair value of traded options that have no vesting restrictions and are fully transferable.

In addition, option valuation models require

the use of assumptions, including the expected stock price volatility.

Because our employee stock options have characteristics significantly

different than those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate,

in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our employee

stock options.

A summary of our stock option activity and related information for equity compensation plans approved by security holders

for each of the fiscal years ended March 31, 2023 and 2022 is as follows:

the greater the volatility, the higher the computed fair value of options granted.

compensation expense related to director and employee stock options under ASC 718 for fiscal years 2024 and 2023 was allocated as follows:

Schedule of stock-based compensation

Cost of sales

Sales and marketing

General and administrative

Research and development

Stock-based compensation expense

total fair value of options granted was computed to be approximately $ 40,025 and $ 56,600 for the fiscal years ended March 31, 2024 and

2023, respectively.

For disclosure purposes, these amounts are amortized ratably over the vesting periods of the options.

stock-based compensation, net of the effect of forfeitures, totaled $ 53,552 and $ 51,892 for fiscal years 2024 and 2023, respectively.

Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully

transferable.

In addition, option valuation models require the use of assumptions, including the expected stock price volatility.

our employee stock options have characteristics significantly different than those of traded options, and because changes in the subjective

input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily

provide a reliable single measure of the fair value of our employee stock options.

A summary of our stock option activity and related

information for equity compensation plans approved by security holders for each of the fiscal years ended March 31, 2024 and 2023 is

Summary of stock option activity

STOCK OPTIONS OUTSTANDING

OPTIONS OUTSTANDING

Weighted-Average

Exercise Price

Exercise Price per Share

BALANCE AT MARCH 31, 2022

3 unchanged sentences

BALANCE AT MARCH 31, 2024

The following table summarizes information about employee stock options

outstanding and exercisable at March 31, 2023:

following table summarizes information about employee stock options outstanding and exercisable at March 31, 2024:

Schedule of employee stock options outstanding and exercisable

STOCK OPTIONS OUTSTANDING

STOCK OPTIONS EXERCISABLE

Range of Exercise Prices

OPTIONS OUTSTANDING

OPTIONS EXERCISABLE

of Exercise Prices

Weighted-Average

Contractual Life

Remaining Contractual Life (in Years)

Weighted-Average

5 unchanged sentences

$0.51 - $1.40

The 1,049,000 options outstanding as of March 31,

2023 are nonqualified stock options.

The exercise price of all options granted through March 31, 2023 has been equal to or greater than

the fair market value, as determined by our Board of Directors or based upon publicly quoted market values of our common stock on the

date of the grant.

Commitments and Contingencies

We have a noncancelable lease agreement for our facilities

at 6797 Winchester Circle, Boulder, Colorado.

751,000 options outstanding as of March 31, 2024 are nonqualified stock options.

The exercise price of all options granted through March

31, 2024 has been equal to or greater than the fair market value, as determined by our Board of Directors or based upon publicly quoted

market values of our common stock on the date of the grant.

following table sets forth options to acquire shares of our common stock granted to Executive Officers during the fiscal year ended March

Schedule of options to acquire shares

Number of securities underlying options (#)

Exercise price of option awards ($/Sh)

Grant date fair value of option awards ($) (1)

Brian Jackman

Number of Securities underlying unexercised options (#)exercisable

Number of Securities underlying unexercised options (#) unexercisable

Option exercise price ($/Sh)

Option expiration Date

Brian Jackman

and Contingencies

have a noncancelable lease agreement for our facilities at 6797 Winchester Circle, Boulder, Colorado.

The lease expires October 31, 2026.

On April 1, 2021, we adopted Accounting Standards

Codification (“ASC”) ASC 842 “Leases” using the initial date of adoption method, whereby the adoption does not

impact any periods prior to April 1, 2019.

ASC Topic 842 retains a distinction between finance leases and operating leases.

The classification

criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing

between capital leases and operating leases in the previous leases’ guidance.

We recorded an operating Right of Use (“ROU”)

asset of $ 1,555,150 , and an operating lease liability of $ 1,619,842 as of April 1, 2019.

The difference between the initial operating

ROU asset and operating lease liability of $ 64,692 is accrued rent previously recorded under ASC 840.

We elected to adopt the package

of practical expedients and, accordingly, did not reassess any previously expired or existing arrangements and related classifications

April 1, 2021, we adopted Accounting Standards Codification (“ASC”) ASC 842 “Leases” using the initial date of

adoption method, whereby the adoption does not impact any periods prior to April 1, 2019.

ASC Topic 842 retains a distinction between

finance leases and operating leases.

The classification criteria for distinguishing between finance leases and operating leases are substantially

similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases’ guidance.

We recorded an operating Right of Use (“ROU”) asset of $ 1,555,150 , and an operating lease liability of $ 1,619,842 as of April

The difference between the initial operating ROU asset and operating lease liability of $ 64,692 is accrued rent previously recorded

under ASC 840.

If the rate implicit in the lease is not readily determinable,

we use our incremental borrowing rate as the discount rate.

We use our best judgement when determining the incremental borrowing rate,

which is the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term to the lease payments.

Our operating lease includes the use of real property.

We elected to adopt the package of practical expedients and, accordingly, did not reassess any previously expired or existing

arrangements and related classifications under ASC 840.

the rate implicit in the lease is not readily determinable, we use our incremental borrowing rate as the discount rate.

We use our best

judgement when determining the incremental borrowing rate, which is the rate of interest that we would have to pay to borrow on a collateralized

basis over a similar term to the lease payments.

operating lease includes the use of real property.

We have not identified any material finance leases as of March 31, 2024.

For the years ended March 31, 2023 and 2022, we had

$ 329,255 and $ 357,644 , respectively, for lease expense.

The following is a maturity analysis of the annual

undiscounted cash flows reconciled to the carrying value of the operating lease liabilities as of March 31, 2023:

the years ended March 31, 2024 and 2023, we had $ 329,255 and $ 357,644 , respectively, for lease expense.

following is a maturity analysis of the annual undiscounted cash flows reconciled to the carrying value of the operating lease liabilities

as of March 31, 2024:

Schedule of principal U.S.

4 unchanged sentences

Weighted-average discount rate

On February 8,

2021, we entered into a second unsecured promissory note under the PPP for a principal amount of $ 533,118 .

This was our second PPP loan.

During the quarter that ended September 30, 2021, we achieved the requirements for forgiveness of the second note and recognized the forgiveness

as extinguishment of debt income of $ 533,118 .

On November 15, 2022, we entered into a loan and security

agreement with Pathward, N.A.

(formerly Crestmark Bank).

November 15, 2023, we entered into a loan and security agreement with Pathward, N.A.

The loan is due on demand and has no financial covenants.

Under the agreement,

we were provided with a line of credit that is not to exceed the lesser of $1,000,000 or 85% of eligible accounts receivable.

rate is prime rate plus 0.5%, with a floor of 6.75%, plus a monthly maintenance fee of 0.4%, based on the average monthly loan balance.

Interest is charged on a minimum loan balance of $300,000, a loan fee of 0.5% at closing and annually, and an exit fee of 3%, 2% and 1%

during years one, two and three, respectively.

The minimum future EIDL payment, by fiscal year, as

of March 31, 2023 is as follows:

Under the agreement, we were provided with a line of credit that is not to exceed the lesser of $1,000,000 or 85% of eligible accounts

The interest rate is prime rate plus 0.5%, with a floor of 6.75%, plus a monthly maintenance fee of 0.4%, based on the average

monthly loan balance.

Interest is charged on a minimum loan balance of $300,000, a loan fee of 0.5% at closing and annually, and an exit

fee of 3%, 2% and 1% during years one, two and three, respectively.

August 4, 2020, we received $ 150,000 in loan funding from the U.S.

Small Business Administration (“SBA”) under the Economic

Injury Disaster Loan (“EIDL”) program administered by the SBA, which program was expanded pursuant to the CARES Act.

EIDL is evidenced by a promissory note, dated August 1, 2021 in the original principal amount of $ 150,000 with the SBA, the lender.

the terms of the Note, interest accrues on the outstanding principal at the rate of 3.75 % per annum.

The term of the Note is thirty years,

though it may be payable sooner upon an event of default under the Note.

minimum future EIDL payment, by fiscal year, as of March 31, 2024 is as follows:

Schedule of principal U.S.

The minimum future U.S.

Bank payment, by fiscal year,

as of March 31, 2023 is as follows:

September 2020, we entered into a note agreement with U.S.

Bank for $ 92,000 .

The note is for five 5 years at a 5 % interest rate and the proceeds were used to purchase equipment.

The note is secured by the

minimum future U.S.

Bank payment, by fiscal year, as of March 31, 2024 is as follows:

Schedule of principal U.S.

During September 2022, we entered into a note

agreement with U.S.

June 2022, we entered into a note agreement with U.S.

Bank for $ 118,970 .

The note is for five 5 years at a 6 % interest rate and the proceeds were used to purchase

The note is for five years at a 6 % interest rate and the proceeds

were used to purchase equipment.

The note is secured by the equipment.

The minimum future principal U.S.

Bank payment, by

fiscal year, as of December 31, 2022 is as follows:

minimum future principal U.S.

Bank payment, by fiscal year, as of March 31, 2024 is as follows:

Schedule of principal U.S.

We are subject to regulation by the United States

Food and Drug Administration (“FDA”).

The FDA provides regulations governing the manufacture and sale of our products and

regularly inspects us and other manufacturers to determine our and their compliance with these regulations.

As of March 31, 2023, we believe

we were in substantial compliance with all known regulations.

FDA inspections are conducted periodically at the discretion of the FDA.

are subject to regulation by the United States Food and Drug Administration (“FDA”).

The FDA provides regulations governing

the manufacture and sale of our products and regularly inspects us and other manufacturers to determine our and their compliance with

these regulations.

As of March 31, 2024, we believe we were in substantial compliance with all known regulations.

FDA inspections are

conducted periodically at the discretion of the FDA.

We were last inspected in October 2019.

Our obligation with respect to employee severance

benefits is minimized by the “at will” nature of the employee relationships.

Our total obligation with respect to contingent

severance benefit obligations was none as of March 31, 2023 and 2022.

We account for income taxes under ASC 740, which requires

the use of the liability method.

ASC 740 provides that deferred income tax assets and liabilities are recorded based on the differences

between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary

Deferred income tax assets and liabilities at the end of each period are determined using the currently enacted tax rates

applied to taxable income in the periods in which the deferred income tax assets and liabilities are expected to be settled or realized.

Income tax provision (benefit) for income taxes is

summarized below:

obligation with respect to employee severance benefits is minimized by the “at will” nature of the employee relationships.

Our total obligation with respect to contingent severance benefit obligations was none as of March 31, 2024 and 2023.

account for income taxes under ASC 740, which requires the use of the liability method.

ASC 740 provides that deferred income tax assets

and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for

financial reporting purposes, referred to as temporary differences.

Deferred income tax assets and liabilities at the end of each period

are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred income tax assets

and liabilities are expected to be settled or realized.

tax provision (benefit) for income taxes is summarized below:

Schedule of income tax expense (benefit)

4 unchanged sentences

Valuation allowance

The following is a reconciliation

between the effective rate and the federal statutory rate:

following is a reconciliation between the effective rate and the federal statutory rate:

Schedule of effective income tax rate reconciliation

March 31, 2023

March 31, 2022

Expected income tax rate

$ ( 145,000 )

State income taxes, net of federal tax benefit

PPP forgiveness

Other permanent differences

2 unchanged sentences

Income tax expense

The components of the net accumulated deferred income tax asset (liability)

are as follows:

components of the net accumulated deferred income tax asset (liability) are as follows:

Schedule of deferred income tax asset liability

March 31, 2023

March 31, 2022

Other deferred assets

11 unchanged sentences

Net deferred tax assets (liabilities)

The primary components of our deferred tax assets

are described below:

primary components of our deferred tax assets are described below:

March 31, 2024

6 unchanged sentences

Total deferred tax assets

In assessing the realizability of deferred tax assets,

management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which net

operating losses and reversal of timing differences may offset taxable income.

Management considers the scheduled reversal of deferred

tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

A valuation allowance is provided

when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Due to our lack of earnings history,

the net deferred tax assets have been fully offset by a valuation allowance.

As of March 31, 2023, we had approximately $ 7.3 million

of net operating loss carryovers for tax purposes.

Additionally, we have approximately $ 376,000 of research and development tax credits

available to offset future federal income taxes.

The net operating loss and credit carryovers begin to expire in the fiscal year ended

March 31, 2024.

In fiscal years ended after March 31, 2023, net operating losses expire at various dates through March 31, 2043 .

operating loss carryovers at March 31, 2023 include $455,000 in income tax deductions related to stock options which will be tax effected

and the benefit will be reflected as a credit to additional paid-in capital when realized.

As such, these deductions are not reflected

in our deferred tax assets.

assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all

of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of

future taxable income during the periods in which net operating losses and reversal of timing differences may offset taxable income.

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies

in making this assessment.

A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax

asset will not be realized.

Due to our lack of earnings history, the net deferred tax assets have been fully offset by a valuation allowance.

of March 31, 2024, we had approximately $ 8.9 million of net operating loss carryovers for tax purposes.

Additionally, we have approximately

$ 384,000 of research and development tax credits available to offset future federal income taxes.

The net operating loss and credit carryovers

begin to expire in the fiscal year ended March 31, 2025.

In fiscal years ended after March 31, 2024, net operating losses expire at various

dates through March 31, 2045 .

The Internal Revenue Code contains provisions, which may limit the net operating loss carryforwards available

1 unchanged sentence

Customers/Suppliers

We depend on sales that are generated from hospitals’

ongoing usage of AEM surgical instruments.

In fiscal year 2023, we generated sales from over 300 hospitals that have changed to AEM products.

depend on sales that are generated from hospitals’ ongoing usage of AEM surgical instruments.

In fiscal year 2024, we generated

sales from over 300 hospitals that have changed to AEM products.

Three vendors accounted for approximately 47 % of our inventory purchases.

Contribution Employee Benefit Plan

We have adopted a 401(k) Profit Sharing Plan which

covers all full-time employees who have completed at least three months of full-time continuous service and are age eighteen or older.

Participants may defer up to 20% of their gross pay up to a maximum limit determined by law.

Participants are immediately vested in their

contributions.

We may make discretionary contributions based on corporate financial results for the fiscal year.

To date, we have not

made contributions to the 401(k) Profit Sharing Plan.

Vesting in a contribution account (our contribution) is based on years of service,

with a participant fully vested after five years of credited service.

Related Party Transaction

We paid consulting fees of $ 55,715 and $ 71,908 to

an entity owned by one of our directors in fiscal years 2023 and 2022, respectively.

have adopted a 401(k) Profit Sharing Plan which covers all full-time employees who have completed at least three months of full-time

continuous service and are age eighteen or older.

Participants may defer up to 20% of their gross pay up to a maximum limit determined

Participants are immediately vested in their contributions.

We may make discretionary contributions based on corporate financial

results for the fiscal year.

To date, we have not made contributions to the 401(k) Profit Sharing Plan.

Vesting in a contribution account

(our contribution) is based on years of service, with a participant fully vested after five years of credited service.

Party Transaction

paid consulting fees of $ 32,032 and $ 55,715 to an entity owned by one of our directors in fiscal years 2024 and 2023, respectively.

Subsequent Events

Management evaluated all of our activity and concluded

that, as of the date the financial statements were issued, no subsequent events have occurred that would require recognition in the financial

statements or disclosure in the notes to the financial statements.

Changes In and Disagreements

with Accountants on Accounting and Financial Disclosure.

evaluated all of our activity and concluded that, as of the date the financial statements were issued, no subsequent events have occurred

that would require recognition in the financial statements or disclosure in the notes to the financial statements.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

October 17, 2023, we were notified that Gries & Associates, LLC (“Gries”), our independent registered public accounting

firm, had completed a sale of its customers to GreenGrowth CPAs Inc.

(“GreenGrowth”).

As a result of this transaction, Gries

resigned its engagement with us immediately.

October 18, 2023, upon the approval of our Audit Committee, we engaged GreenGrowth as our new independent registered public accounting

firm for our fiscal year ending March 31, 2023 and interim periods.

reports on our financial statements for the past two years did not contain an adverse opinion or a disclaimer of opinion, and were not

qualified or modified as to uncertainty, audit scope, or accounting principles.

The report had been prepared assuming that we would continue

as a going concern and included an explanatory paragraph regarding our ability to continue as a going concern as result of recurring

losses and a deficiency in shareholders’ equity.

the years ended March 31, 2023 and 2022, and the subsequent period through October 17, 2023, there were (i) no disagreements (as described

in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between us and Gries on any matter of accounting principles or

practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Gries’ satisfaction, would

have caused Gries to make reference thereto in its reports on the financial statements for such years;

and (ii) no “reportable

events” within the meaning of Item 304(a)(1)(v) of Regulation S-K, except that Gries advised us of material weaknesses in its internal

control over financial reporting as of March 31, 2023 and 2022.

our two most recent fiscal years ended March 31, 2023 and 2022, and the subsequent interim period through the date of its engagement,

we did not consult with GreenGrowth regarding either of the following:

(i) the application of accounting principles to a specified transaction,

either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and GreenGrowth did not

provide a written report or oral advice on any accounting, auditing or financial reporting issue that GreenGrowth concluded was an important

factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue, or (ii) any matter that was

either the subject of a disagreement, as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions, or a “reportable

event,” as described in Item 304(a)(1)(v) of Regulation S-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data